No hangover for Footsie

It's not often a post-Christmas hangover is good news, but speculation that this yuletide was a boozy one helped drinks groups Diageo and SABMiller drive up the FTSE 100 on Wednesday.

Guinness and Smirnoff maker Diageo was one of the top risers on the blue chips index in the first day of trading after the break.

It rose 21.5p or 2.2% to close at 1005.5p. The positive sentiment spilled over into other drinks groups with Peroni brewer SABMiller not far behind, up 19p, or 1.6%, at £11.85.

But the top spots were dominated by Standard Life and Intercontinental Hotels as bid talk continued to swirl around both.

Intercontinental, which owns the Crowne Plaza and Holiday Inn brands, added 35p, or 2.9%, to £12.52 on rumours of private equity interest. Insurer Standard Life, meanwhile, was up 10p, or 3.5%, to 300.25p as talk persisted of interest from French rival Axa.

Those gains combined with rising shares on Wall Street helped lift the FTSE 100 index of leading London-listed shares to 6245.2, up 55.2 points or 0.9%.

Further support came from miners as gold prices picked up and after rises earlier this week for copper. Vedanta Resources was the strongest performer in the sector and in the overall FTSE 100, up 55p, or 4.8%, to £12.10. Rio Tinto gained 60p, or 2.3%, to £27.09 and Kazakhmys was up 25p, or 2.3%, at £11.02.

Back to the Christmas-themed trading, Wednesday was a mixed day for retailers. The moves reflected reports of a big turnout on Britain's high streets combined with doubts over how much was actually spent.

Tesco, Britain's biggest online retailer, was seen as one of the winners as it continues to benefit from time-strapped shoppers looking for convenience. Shares in the supermarket giant were up 7p, or 1.7%, at 409.75p.

Its rival Sainsbury rose 6.25p, or 1.5%, to 413.25p while Wm Morrison was 5.25p higher at 257.5p.

Further down the market, Woolworths managed to top the day's mid-cap gainers. Just weeks before Christmas the high street sweets, CDs and stationery store had rattled investors' nerves with a profit warning and predictions of a tough festive season.

But traders suspected Christmas had not been quite as poor as feared and Woolworths shares closed up 2.75p, or 8.3%, at 36p, not far below where they started the month at 37p.

Elsewhere in the retail sector, menswear store Moss Bros leapt on renewed reports Icelandic raider Baugur was pondering a bid. Baugur, which last month took department store House of Fraser private, is thought to have been interested in the wedding hire specialists for a while and said in the summer it had around £1bn to spend in British retailers.

Shares in Moss Bros, which has more than 150 shops up and down Britain as well as a hire outlet on the QE2 cruise ship, closed up 10.5p, or 15.9%, at a five-week high of 76.5p. The group, which also operates the UK franchise for fashion label Hugo Boss, currently has a market capitalisation of around £70m.

Back on the FTSE 100, Barclays rose 5.5p to 735p after it said it had sold 6bn shares as part of a plan to sell its 43.7% stake in FirstCaribbean International Bank to CIBC.

But Vodafone was under pressure on worries over how much it might pay to acquire a controlling stake in Hutchison Essar, India's fourth-largest mobile phone operator. Hutchison Whampoa is reported to have signalled it will only entertain offers well over $14bn for its 67% of the company while India's Essar is believed to have made an offer of around $17-$18bn for the stake.

Vodafone, which said last week it was mulling buying a controlling stake in Hutchison Essar, was down as much as 0.75p in early trade but recovered by the close to be up 1p at 143p.

Further down the market, pharmaceutical company SkyePharma was one of the morning's biggest losers after news that costs of the group's Flutiform asthma drug have exceeded expectations, although it remains within the original timetable and approval is expected in the first half of 2009.

The group has finalised a new £35m loan which will be used to fund development of the asthma drug, costs of which are now expected to total $70m through to launch.

Shares in SkyePharma managed to close up 0.25p, or 0.9%, at 27p having fallen as much as 6.5% in early trade. They have almost halved in value from 49.5p at the start of this year.

In the travel sector, traders seemed to welcome the news that First Choice Holidays has bought online hotel booking site Laterooms.com for up to £120m. The move should give First Choice access to a growing online customer base in the travel industry and help its plans to reduce reliance on the traditional package holiday. Shares in the group were up 4p, or 1.4%, at 283p.

On junior stock market Aim, European Diamonds rose 1p, or 7.4%, to 14.5p after it said it had completed the sale of a batch of diamonds from one of its open pit mines in southern Africa.

The group, which explores for diamonds in the Kingdom of Lesotho and in Finland, said the $2.17m raised was "significantly higher" than in previous sales.